The State Bar of California has recommended a Glendale-based attorney be disbarred after finding her "culpable," or guilty, in an embezzlement scheme involving funds from a multimillion-dollar settlement relating to the Armenian Genocide.
The state bar has asked the California Supreme Court to strip Rita Mahdessian of her ability to practice law in the state after determining there was enough evidence that she had misled a judge, misappropriated funds and committed moral turpitude.
This comes a year after she and her husband Vartkes Yeghiayan were accused of embezzling more than $300,000 of settlement funds from a class-action lawsuit over survivor benefits for descendants of Armenian Genocide victims.
Specifically, in its Aug. 29 recommendation for disbarment, the state bar said Mahdessian misappropriated $30,000 of that $300,000.
The organization said Mahdessian opened an investment account in which she transferred the funds and that the account was opened in her daughter's name without the daughter's knowledge or permission.
"[Mahdessian] then continued to maintain control over the funds, about which the daughter had no knowledge until being subpoenaed by the state bar to testify in this matter," according to bar documents.
Although Mahdessian and her husband have denied any impropriety, state bar officials said there was enough evidence of culpability, or guilt, on Mahdessian's part to recommend disbarment.
Jonah Lamb, a state bar spokesman, said it's unknown when the court will make its decision.
Yeghiayan, who is also a practicing attorney, has similar but separate charges filed against him. However, Lamb said Yeghiayan has been suffering from health issues and the case against him has been postponed.
According to bar documents, Mahdessian and Yeghiayan misrepresented a pair of nonprofit groups they created to appropriate the settlement money.
The money was the result of a pair of class-action lawsuits in 2005 against French insurance company AXA and the New York Life Insurance Co. over survivor benefits for descendants of victims of the Armenian Genocide. The pair were co-counsels on the case against AXA.
The resulting $20-million settlement was split into two parts; $17.5 million was paid out to members of the class-action suit, while $3 million was set aside for an Unclaimed Benefits Fund, to which nine beneficiaries were named, according to court documents.
Any money left over after paying the main settlement and administrative costs would be transferred into the Unclaimed Benefits Fund, which could then be distributed to charitable nonprofit organizations recommended by the suit's lawyers — Mahdessian and Yeghiayan.
The organizations were to "advance the charitable interests of the Armenian community," according to documents from the state bar.
State bar officials said one of the nonprofits, the Center for Armenian Remembrance, was based out of the couple's Glendale law firm and created three months after the settlement's approval. A second nonprofit, the Conservatoire de la Memoire Armenienne, was also said to be based out of their office.
According to the state bar, Mahdessian and Yeghiayan requested more than $300,000 for the two nonprofits because of their supposed charitable status. However, according to court records, they were unable to provide any record of charitable activity and failed to disclose their ties to the two organizations.
The state bar said the couple used the funds for personal expenses such as issuing checks to their own law firm and paying law school tuition for their two children.